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Judge rules that shadowy Arizona group must turn over records to FPPC

By Steven Harmon Bay Area News Group

Posted:
10/31/2012 05:51:15 PM PDT

Updated:
10/31/2012 08:10:05 PM PDT

SACRAMENTO -- A judge ruled late Wednesday that an Arizona group that stunned California's political world with an anonymous $11 million donation must turn over documents to the state's campaign finance watchdog so it can determine whether the group broke any laws.

Two hours after listening to arguments from both sides, Sacramento County Superior Court Judge Shelleyanne Chang affirmed what she'd tentatively decided a day earlier: to require Americans for Responsible Leadership to comply with the Fair Political Practices Commission's request to audit all emails and other communications related to the group's donation to the Small Business Action Committee.

Chang ordered the group to turn over the documents to the FPPC by Thursday at 5 p.m., but attorneys for the group said they would appeal the decision.

"The Court finds that irreparable harm has occurred and continues to occur as each day passes, and voters continue to cast their votes without information that may influence their votes," Chang wrote.

The question of disclosing the donors was paramount in the FPPC's lawsuit, given that the election is only days away and the significance that the $11 million can have in influencing the election's outcome.

"This was a really huge contribution that was made with no information associated with it about who the donors were -- and the voters have a right to know this," said Ann Ravel, the chairwoman of the FPPC.

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The out-of-state mystery donation -- which experts believe is California's single largest anonymous political contribution -- was made only two weeks ago to the business group running campaigns against Proposition 30, Gov. Jerry Brown's tax-hike initiative for schools, and for Proposition 32, the measure that would curb the ability of unions to collect dues from its members.

"We are disappointed in today's court ruling," said Matt Ross, spokesman for the Arizona group's legal team. "We have asserted all along that the FPPC does not have the authority to issue an audit in advance of the election. We continue to believe so and will appeal this case."

But Ravel said she will ask the state Court of Appeal to deny the appeal for a stay.

"It's quite clear they won't abide by this order, so we are going to go to court," Ravel said. "We know their M.O. is to delay. Hopefully, the court will make the decision quickly."

If the appellate court denies the group a stay, Ravel said, the FPPC will demand that the group turn over the records immediately. If the agency determines that the group broke campaign finance law, it would demand it disclose its donors immediately.

"And if they fail to do so, we'd go to the court to get them ordered," Ravel said.

At Wednesday's hearing, a Virginia attorney representing the group accused the FPPC of trying to "railroad" the group.

"We believe an audit is not authorized, that it would violate First Amendment rights, and that (the FPPC) must show irreparable harm, and it hasn't done so," said Jason Torchinsky, a partner with the firm Holtzman Vogel Josefiak, which represents the Arizona group.

The $11 million donation has become a rallying cry for Gov. Brown, who has kept up pressure on the campaign trail to "unmask" the Arizona group while he seeks votes for his measure, which would raise income taxes on the wealthy and hike the state sales tax by a quarter-cent to help fund education and other programs.

And it brought scrutiny to the growing practice of nonprofit groups pouring millions of dollars into political campaigns this year. Under IRS codes, nonprofit 501(c)4 organizations like the Arizona group are considered social welfare organizations that are not primarily involved in politics and thus not required to disclose their donors.

Key to the FPPC's inquiry is whether the group solicited funds of more than $1,000, which would make it a campaign committee that would have to abide by California law.

The group's attorneys contend that the state never audits campaign committees until after they turn in their final reports in January. But the FPPC said the group doesn't get the benefit of the wait since it did not form as a candidate or a committee.

Ravel said attorneys for the group are simply trying to run out the clock.

"The respondents are doing everything they can to stall," Ravel said. "It's clear they don't want to comply with California law -- their arguments indicated that. But we're going to be very aggressive in filing appeals if we have to opposing any stay."

The FPPC is seeking all communications related to the donation -- including text messages, emails, letters, notes from phone calls, minutes -- between the group's board of directors, donors, attorneys and the Small Business Action Committee.

Torchinsky had argued that the Supreme Court's 2010 Citizens United decision protected the group from having to disclose their donors. But Chang knocked back that position in her tentative ruling.

Chang said that although Citizens United allows unlimited spending by corporations, it does not address whether donors should be publicly disclosed.

She said "nothing in Citizens United" prohibits the state from mandating disclosure.